GLOBAL INVESTMENT STRATEGY, EXECUTION AND RISK MANAGEMENT FOR INSTITUTIONAL INVESTORS

BONDS YIELDS : DID REAL MONEY EXIT FURTHER BOND LONGS AT MONTH END? FRIDAY WITNESSED A "DRAMATIC" JUMP IN DAILY VOLUME WHICH POINTS TO FURTHER LONG LIQUIDATION! GIVEN ALL HAVE BEEN MOANING ABOUT THE RECENT LOW VOLUMES IT IS A MAJOR SURPRISE TO SEE FRIDAYS EXPLOSION IN VOLUME, ESPECIALLY WHEN MANY FUTURES CONTRACTS ARE OVER BOUGHT.

IT WILL BE KEY THIS WEEK IF THERE IS AN ADDITIONAL DROP IN OPEN INTEREST. IF IT IS THE CASE THEN EVERY CHANCE YIELDS WILL RATCHET HIGHER AS PER THE LONG TERM CHARTS.

OPEN INTEREST HAS SEEN A MAJOR DROP IN LONG HOLDINGS FROM MARCH, THE RESULT IS YIELDS COULD RALLY HARD OVER THE NEXT FEW MONTHS, CONFIRMING THE LONGSTANDING QUARERTLY-MONTHLY CALL.

** STILL CONFIDENT WE HAVE SEEN THE LOWS IN LONGEND YIELDS!**

HAVE ATTACHED GOLD AND OIL CHARTS TOO.

 

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

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• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
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THE USD HAS OPENED THE MONTH AT OR AROUND SIGNIFICANT LEVELS, LETS SEE IF THE SUSTAINED USD WEAKNESS CAN BREACH THEM THIS WEEK.

THE AUD COULD BE THE USD BAROMETER GIVEN IT IS SO CLOSE TO A MULTI YEAR RETRACEMENT 0.7185 AND MOVING AVERAGE 0.7274.

HERE ARE A SELECTION OF USD CROSSES THAT MUST SURELY SEE THE USD FADE OVER TIME. SIMILAR TO THE BOND MARKET REJECTION OF ITS MARCH EXTREMES!

I HAVE USED NON-CORE CROSSES AS THEY ACHIEVED SOME MAJOR DISLOCATIONS IN MARCH SIMILAR TO US BONDS. I HAVE MARRIED THE USD WITH BRL,MXN,RUB AND CLP. THEY HIGHLIGHT BOTH USD AND US BONDS ARE HEADING LOWER FOR SOME TIME.

SOME CROSSES ARE AT MULTI YEAR EXTREMES AND REPRESENT A SIZEABLE LONGTERM TRADE OPPORTUNITY.

 

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

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• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
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• •             Chris

 

 

BONDS YIELDS : ARE WE ABOUT TO SEE YIELDS FINALLY RECOVER GIVEN MANY DAILY FUTURES CHARTS HAVE AN OVER BOUGHT RSI! IT HAS BEEN A TOUGH COUPLE OF MONTHS FOR THE "YIELD HIGHER CALL" BUT TODAYS REVERSALS COULD BE THE START.

THE LONGTERM CHARTS STILL CALL FOR IT SO THEREFORE IT IS UP TO THE VOLUME TO PICK UP FOR THAT TO HAPPEN, POST MONTH END.

HAVE ATTACHED GOLD AND OIL CHARTS TOO.

OPEN INTEREST AND VOLUME HAS SEEN A MAJOR DROP IN LONG HOLDINGS FROM MARCH, THE RESULT IS YIELDS COULD RALLY HARD OVER THE NEXT FEW MONTHS, CONFIRMING THE LONGSTANDING QUARTERLY-MONTHLY CALL.

PREFERENCE STILL REMAINS FOR A BOND YIELD BOUNCE AND STOCK SELL OFF.

** STILL CONFIDENT WE HAVE SEEN THE LOWS IN LONGEND YIELDS!**

 

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

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• •             Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge. We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.
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• •             I also direct you to our disclaimer on our email footer:
• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
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• •             You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 
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• •             Chris

 

 

VOLUME AND OPEN INTEREST UPDATE : VOLUME CONTINUES TO REMAIN A PROBLEM BUT HOPEFULLY OVER BOUGHT DAILY RSI’S WILL REMEDY THAT. THESE PITIFUL RANGES NEED TO BE BREACHED.

WE HAVE CONTINUED THIS MONTH IN THE SAME VANE AS THE LAST, LOW VOLUME AND WANNING OPEN INTEREST.

 

**I MANY CASES THE HISTORICAL OPEN INTEREST HAS SEEN A VERY MARKED DROP, US 10YR 5YR AND 2YR.**

AN INTERESTING CHART ON PAGE 11 WHICH SHOWS THE US 30YR OPEN INTEREST HAS PEAKED IN MARCH, THAT IS HISTORICALLY SIMILAR TO 1998 & 2008.

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

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• •             Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge. We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.
• •            
• •             If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.
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• •             I also direct you to our disclaimer on our email footer:
• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
• •            
• •             You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 
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• •             Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287
• •             Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185
• •             Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626
• •             Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303
• •             Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796
• •            
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• •             If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.
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• •             Chris

 

 

GILTS... APF Today

> "Clean up on aisle 5!"

> It seems a bit odd to suggest that this week's gilts supply went poorly when each of the issues tapped are at/near their richest ever yield levels on the open this am. But by our usual auction metrics, demand was sloppy in each of the taps with GEMMS able to grab the issues at solid discounts from the snap levels that were already at/close to the day's lows.

 

> While we don't need gilts richer in absolute terms, there are sectors of the curve that have been beaten up lately, largely in anticipation of tomorrow's Sep-Nov supply calendar. The 4Q36s and 1T37s stand out like a sore thumb as the cheapest issues on the curve as the mkt awaits confirmation of a Sep 15yr syndication tomorrow (some GEMMS are axed buyers of them this am BTW) and the 0E26s, 0F50s and ultras have been banged up a bit too.

 

A 4bps move in this fly is a lot, especially 5 weeks-plus before the deal is even expected to happen. What if the DMO decides NOT to bring the 15yr?

 

 

 

> Today's APF will be interesting, not just to mop up some net DV01 but to see if the issues that have been dumped into their ops over the last week (36s, 37s, 71s, etc) make another appearance. The APF has bought a total of £1.458bn 1F71s in the last 3 APF operations – the equivalent of an auction – which has kept the issue bid.

> The 0E26s, 1Q27s, 1F28s, 0R30s, 1Q41s and 1F54s are all ineligible today. With just £370mm notional left of the 0S29s and the 27s and 1F28s not available, this is likely to be an off the runs show.

 

There's been a good deal of chatter about  which issues are likely to feature highly in the long-end auction cycle in Sep-Nov. Given the minutes from the DMO's consultation regarding tomorrow's supply calendar, it seems the 1T57s are much less likely to be tapped at all in favour of the 61s (which have yet to be tapped) or even the 71s. Thus suggests the Aug 11^th tap of the 1T57s could be its last (for a while at least) which could prompt the RV community to buy the issue on the curve. They look cheap on most metrics but these stand out to us:

 

UKT 1T49-1T57-1F71 fly… This comes with a warning label given the volatility of the 71s but this illustrates how cheap these 57s have become.

 

UKT 1T49-1T57-2H65 fly looks similar with less volatility…

 

More to come…

 

Mark

 

 

 

 

 

 

 

 

 

 

 

Mark Funsch

 

O:            +44 (0) 203 - 143 - 4177

M:            +44 (0) 789 - 996 - 4051

E:             Mark.Funsch@AstorRidge.com

W:            www.AstorRidge.com

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This research was prepared by Mark Funsch.  He is a consultant with Astor Ridge.  A history of his marketing commentaries can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains recommendations, those recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

THE USD CONTINUES TO HEAD LOWER ON SO MANY CROSSES BREACHING NUMEROUS MAJOR LEVELS. THIS BEGS THE QUESTION, WHEN WILL BONDS FAIL GIVEN PREVIOUS CORRELATIONS.

THE USD LOOKS TO BE GOING ONE WAY FROM HERE WHICH HINTS BONDS NEED TO DECIDE INTO MONTH END.

 

**WORTH A READ**

HERE ARE A SELECTION OF USD CROSSES THAT MUST SURELY SEE THE USD FADE OVER TIME. SIMILAR TO THE BOND MARKET REJECTION OF ITS MARCH EXTREMES!

I HAVE USED NON-CORE CROSSES AS THEY ACHIEVED SOME MAJOR DISLOCATIONS IN MARCH SIMILAR TO US BONDS. I HAVE MARRIED THE USD WITH BRL,MXN,RUB AND CLP. THEY HIGHLIGHT BOTH USD AND US BONDS ARE HEADING LOWER FOR SOME TIME.

 

SOME CROSSES ARE AT MULTI YEAR EXTREMES AND REPRESENT A SIZEABLE LONGTERM TRADE OPPORTUNITY.

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

• UK:         14-16 Dowgate Hill, London EC4R 2SU
• US:          245 Park Ave, 39^th Floor, NY, NY, 10167
• Office:   +44 (0) 203 143 4174
• Mobile:  +44 (0) 7980708683
• Email:     chris.williams@astorridge.com
• Web:       www.AstorRidge.com
•  
• •             I provide our research notification below for your convenience:
• •            
• •             Research Unbundling:
• •            
• •             Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge. We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.
• •            
• •             If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.
• •            
• •            
• •            
• •             I also direct you to our disclaimer on our email footer:
• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
• •            
• •             You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 
• •            
• •             Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287
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GERMANY - 7yr Tap Today – 4bn DBR 0 11/27s

> These are a good news - bad news in my mind...

> Good news is this issue's cheap in RV by most metrics.  The 2/28-11/27-8/28 fly is at its cheapest at +5.25bps mid, the DBR 8/25-11/27 Z-sprd has steepened to +3bps this am (cheapest since end of June and the sprd to EONIA has cheapened back to -30bps.

 

> The bad news is Germany is behind on their issuance for 2020, this issue is still only 10bn and the outright yield level is an eye watering -61bps in an environment where most of our dealers are calling for 10yr DBRs to cheapen into year end.

> This will be popular with RV guys and there should be a bit of extension demand into this issue given month-end index flows at week's end. However, not sure there's still a pool of cash waiting in the wings at this stage and we're going to get a lot more of these before they're done.

 

 

 

 

 

 

Mark Funsch

 

O:            +44 (0) 203 - 143 - 4177

M:            +44 (0) 789 - 996 - 4051

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This research was prepared by Mark Funsch.  He is a consultant with Astor Ridge.  A history of his marketing commentaries can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains recommendations, those recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

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VOLUME AND OPEN INTEREST UPDATE : SADLY VOLUME CONTINUES TO REMAIN POOR BUT HOPEFULLY PRE OR POST MONTH END WE REMEDY THAT. THESE PITIFUL RANGES NEED TO BE BREACHED.

WE HAVE CONTINUED THIS MONTH IN THE SAME VANE AS THE LAST, LOW VOLUME AND WANNING OPEN INTEREST.

**I MANY CASES THE HISTORICAL OPEN INTEREST HAS SEEN A VERY MARKED DROP, US 10YR 5YR AND 2YR.**

AN INTERESTING CHART ON PAGE 11 WHICH SHOWS THE US 30YR OPEN INTEREST HAS PEAKED IN MARCH, THAT IS HISTORICALLY SIMILAR TO 1998 & 2008.

 

 

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BONDS YIELDS : IT HAS BEEN A TOUGH COUPLE OF MONTHS FOR THE “YIELD HIGHER CALL”, GIVEN VOLUMES HAVE FALLEN OFF A CLIFF. THE LONGTERM CHARTS STILL CALL FOR IT SO THEREFORE IT IS UP TO THE VOLUME TO PICK UP FOR THAT TO HAPPEN, PRE OR POST MONTH END.

HAVE ATTACHED GOLD AND OIL CHARTS TOO.

OPEN INTEREST AND VOLUME HAS SEEN A MAJOR DROP IN LONG HOLDINGS FROM MARCH, THE RESULT IS YIELDS COULD RALLY HARD OVER THE NEXT FEW MONTHS, CONFIRMING THE LONGSTANDING QUARERTLY-MONTHLY CALL.

PREFERENCE STILL REMAINS FOR A BOND YIELD BOUNCE AND STOCK SELL OFF.

** STILL CONFIDENT WE HAVE SEEN THE LOWS IN LONGEND YIELDS!**

GERMAN MONTHLY YIELDS HAVE POPPED OUTSIDE THE LONGTERM DOWNTREND CHANNEL.

 

 

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GILTS... Quick Colour

• Pre-supply/no APF day so we'll spend it trying to cheapen up this week's tap issues a bit and ruminate over whether the sales of ultras into the APF last Tue/Thu are bullish or bearish for the sector. We've all got one eye on the covid-tracker too given the pop in cases seen in some regions and the Spanish-quarantine shocker that hit Saturday am. 

• DMO consultation at 3:30pm today will help to further clarify the Sep-Nov supply calendar due to be released this Fri at 7:30am. The only real debates are the maturity/timing of the 15yr syndication and whether there's both a long linker AND an ultras deal. If the maturity of the 15yr deal is 16yrs+ and not a 14.75yr (as some expect to avoid index chaos around the 15yr point) then the DV01 of the all of that long issuance declines along with steepening pressure. Similarly, while they may not announce the exact maturity of an ultras syndicated deal, we'd bet that it's likely to be 2061s or maybe even 2071s.

• 1Q27s tap tomorrow but few signs of any meaningful concession on the curve yet. The 1H26-1Q27 Z-sprd box has flattened back to the 2.4bps area  (+2.0bps area has held since the end of Apr) and the 1H26-1Q27-1F28 fly has grinded richer. We've been fans of this issue for the last few weeks and were hoping for a cheapening into tomorrow to add to longs as they slide into the 3-7yr APF bucket next week.

 

 

• While the 1Q27s have been solid, the 1F54s have wobbled into tomorrow's tap.  They occupy that no-mans land between the 30yr and 40yr point and while they've been cheapening on the curve (see chart below) as ultras bounced, they'll be tapped again on Aug 25^th and at least once more in the Sep-Nov calendar (£1.5bn tap tomorrow takes them to a max of ~£17.5bn, still the smallest seasoned issue in the sector aside from 1F71s). Where they are likely to see some short covering interest is vs 60/61s given there's a solid chance the 61s are tapped in Sep/Oct. In addition, we'll be getting a LOT of 2050s over the next few months and at this level on the curve AND RSIs overdone, these 54s look ripe for a 1.0-1.5bps correction of this move.

 

 

• 0E23s tap on Wednesday am. They started off cheap but they're not anymore. Their yield is -10.7bps this am and they've richened back to within a blip of their richest sprd to SONIA at -4.4bps. This issue's dominated by CB/SWF and money mkt players and will go without a hitch.

 

• Wed at 11:30am we'll get a £2.75bn tap of the 1F28s, £250mm less than expected as the DMO decreased the size. Lots of competition for attention in their sector (see my note from last week detailing this) but with a solid repo bid, more than ample room under the 70% APF limit of around £7bn notional and ok carry and roll, we'd expect this issue to trade ok on the curve coming out of this tap. While we remain stalwart fans of the 0E28s on a medium/longer term basis (1Q27-0E28-1F28 fly still around +10.6bps), the 0E28s are still a couple taps away from complete normalization on the curve. ALSO, remember how we thought the 0S29s were looking a tad shaky as their richening momentum ran out of steam? Well, even with a tap of the 1F28s two days away, the 1F28-0S29 Z-sprd box has steepened a basis point (2.5 to 3.5) and looks to have further steepening to come, especially since the 29s eligibility is near rock bottom and won't be replenished until Aug 19^th.

 

UKT 0F25-1F28-4T30 fly

 

     

 

More to come…

 

Mark

 

 

 

 

Mark Funsch

 

O:            +44 (0) 203 - 143 - 4177

M:            +44 (0) 789 - 996 - 4051

E:             Mark.Funsch@AstorRidge.com

W:            www.AstorRidge.com

UK:          14-16 Dowgate Hill, London UK EC4R 2SU

US:          245 Park Ave, 39^th Floor, NY, NY, 10167

 

This research was prepared by Mark Funsch.  He is a consultant with Astor Ridge.  A history of his marketing commentaries can be provided upon request in compliance with the European Commission's Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains recommendations, those recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796